Doubling is a strategy that requires a player, such as a trader, gambler, or investor, to increase the stakes by a multiple of two (i.e., double the stakes) each time a trade, bet, or investment results in a loss. After each win, the player resets and begins the system again. Doubling strategies are deceptive because they have not only a high probability of earning low-but-steady returns but also an extremely small-but-positive probability of experiencing catastrophic losses. As a result, the expected value of a trade, bet, or investment might be negative, but this fact is masked by the appearance of steady, low-risk returns. Outcomes that have high probabilities of low returns and low probabilities of catastrophic losses are often called Taleb Payoffs.

Losses from doubling-based strategies ...